The Technology Choices

In the battle between Microsoft Business Solutions (MBS) and the UK-based the Sage Group plc (LSE: SGE.L) for the small-to-medium enterprise (SME) market segment, technology choices will be a major factor. The previous parts of this note detailed the strategies of these two major vendors and analyzed how the market would respond.

But, going a mile further, there are some important areas where the synergy and a bridge between MBS and the rest of the "classic" Microsoft world could take place, such as the previously mentioned "user experience" mantra. The basic hypothesis is that Office (i.e., Word, Excel, and Outlook) constitute the core of the user experiences of many millions of existing and prospective desktop customers. Leveraging that ubiquitous look-and-feel acquaintance in the MBS product lines (and in those of rapidly increasing independent software vendors [ISV]) is something that can add tremendous clout to MBS sales efforts—with the supposedly minimal training for the information technology (IT)-resource constrained SME market.

In fact, the ongoing Outlook, Excel, or Word user interface (UI) metaphor moves may speak volumes about where the entire market is going. Possibly the most vocal in that regard could be the recent announcement made by Microsoft and SAP that they are jointly developing a product that will integrate back-end SAP business processes and transactional data into Microsoft Office front-ends. The product, code-named Project Mendocino, whose beta release is due out in the fourth quarter of 2005, with full availability slated for next year, promises to bridge the disparate worlds of mySAP ERP instances and Office desktop applications, and is aimed at mySAP ERP and later releases and Office 2003, whereby the latest versions of mySAP Business Suite and mySAP All-in-One solutions should also work with it. Both vendors said they will sell a complete solution, which means that SAP will resell Office, and Microsoft will resell licenses to SAP's upcoming business process platform.

While the battles over applications, databases, middleware, and operating systems (OS) remain important (and Microsoft is far from abandoning these and thereby even competing with SAP on that front, and for a detailed discussion in this regard, see SOA-Based Applications and Infrastructure—The Next Frontier?), the UIs and ease of data entry really force how users feel about software.

Applications that integrate with Office applications or have a steady familiar appearance are easier to learn and easier to use. For the people who use these products on a day-to-day basis, that can make up for a lot of lack in functionality (albeit to a degree). The vendors should also bear in mind that users are also more productive if they are provided instructions and documents in their native language. Given that in the US the Spanish-speaking population has become the largest minority group, the truly user-friendly software should allow different users to work in different languages while being in the same application.

The end user alwasys has to be kept in mind, as the UI has to be pleasingly simple, perfect for masses of even casual consumers with potentially no technical experience to operate. With one of the most significant impediments and costs of application deployment being the training of users, the more process-friendly an application can be, and the more pluggable with its surroundings it can be, the easier it will be accepted. User resistance is a major reason that software installations either fail or fall short of being truly effective. On the other hand, a chief cause for user resistance is the time it takes to learn an application and the lack of comfort with the way different products may look.

To date, the predominant means of improving usability and interoperability has been portal frameworks (subsequent to simple Web interfaces), and these have proliferated both within organizations and within vendors' products. However, this is merely the start, because the ability to support context (giving the user the relevant information and services, regardless of geography, device, etc.) improves through emerging technologies and standards. Initially, many have liked the above mentioned MBS' idea of a role-based UI, particularly if it would be possible to have, for example, a Word 2003-style task panel as a front-end to an enterprise resource planning (ERP) package. This would mean that when the users go to, for example, a customer card/master file, the common business processes that they carry out with a customer would be shown in a task panel with an option to show more options.

By making the system process-oriented for the users, one would be removing the need to memorize a series of steps to achieve a business process and instead be able to guide them through it. If users do not have to exit their familiar desktop application to tap into ERP data/sessions or if they can e-mail from Outlook without exiting an ERP package, they can be more productive. The faster users get up to speed on software, the more time they can spend doing the business of business, not just trying to master technology.

To that end, MBS has so far given two of its accounting ERP product lines, Great Plains and Navision, along with Microsoft CRM, the Outlook interface, while Solomon and Axapta are on their way. The vendor is certainly also scoring with the decision of many ISVs to provide a UI as an option on their products without users needing to exit Word or Excel. Also, Microsoft is working on a more independent way to link Office front-ends to major back-office applications. Besides its currently shipping InfoPath forms editing and layout capabilities to ease the sharing and routing of forms, and Information Bridge Framework (IBF), which seeks to make Office applications de facto front-ends to back-office processes and data, the giant is also is building—somewhat overlapping in scope—Project Elixir to bring back-office data into Outlook.

Longer term, Microsoft is quietly working on an Office-labeled real-time reporting server that is designed to bring the power of fast analytics and reports into the company's portfolio. The product, code-named Maestro, aims to provide near real-time data conduits from popular enterprise applications, such as those from SAP and Oracle PeopleSoft, and put the power of real-time business intelligence (BI) in the hands of business users to make informed and timely decisions.

This is Part Six of the Is "Sage" Wiser and Better than "Best"? series.

Yet, Here Comes the Technology Choice versus Lock-in Dilemma

However, although Microsoft's Project Green will provide an improved UI, better interoperability via Web services, and new features for context-sensitive BI, there is always a high probability of doing so by tying the ERP systems more tightly to several Microsoft infrastructure products, such as SharePoint Portal, Exchange, Outlook, SQL Server, and SQL Reporting Services. Certainly, this will be a non-issue for pure Microsoft shops, whose infrastructure strategy revolves around these products. However, for many enterprises with multi-platform solutions, or even those that are lagging badly with Microsoft products' upgrades, there will either be the imminent need for deploying these recent technologies (at least for optimal performance reasons) or otherwise face the ramifications of missing out on the above depicted enhancements of Project Green.

In all fairness, whether or not this is an intentional attempt by Microsoft's to lock-in enterprise applications users to its own infrastructure stack, it is not much different than Oracle, which has made it clear that it intends, over the long term, to migrate its lately acquired PeopleSoft and JD Edwards customers to its own database and middleware stack, recently renamed Fusion. Still, despite Oracle, SAP, or IBM wanting customers to prefer their respective platforms, these customers tend to have more choice than those of Microsoft, which tends to tightly bundle all its technologies and make them interdependent. However impressive, the MBS "affordable adaptability" approach outlined previously (other than deploying Web services) seems to focus on a Microsoft-centric approach, with no mention of the ability for the "common user experience" to include technology other than MBS or Microsoft Classic.

Conversely, the "freedom of choice" and "openness" mantras have been professed independently by Sage/Best (and especially ACCPAC). Namely, contrary to its archrivals and to most of its current parent-sister companies, ACCPAC has embraced the support for multiple platforms, considering it as a competitive strength rather than a weakness within truly an international market. While no one disputes Microsoft's dominance in the market segment, in Europe a notable percentage of servers (and even some desktops) already run on Linux, while IBM DB2 and Oracle database still have strength and appeal in many parts of the world.

Thus, the vendor supports all the above-mentioned platforms, and because of the Advantage system's architecture (i.e., separate object-oriented business logic from database), it is not an excruciating job to update drivers for ACCPAC to produce new platform supporting versions. Consequently, both ACCPAC Pro and Advantage Series run on Windows and Linux, and Microsoft SQL database. Differing however, Pro Series also runs on Microsoft FoxPro, while Advantage Series also runs on IBM DB2, Oracle, and Pervasive. This selection has yet to be seen from any other vendor within this tier of enterprise application providers.

Sage claims to have an aggressive integration plan in place (which will likely be fleshed out more during upcoming user conferences) to ensure the customers have, in essence, the benefit of best-of-breed solutions offered from a single vendor and providing the out-of-the-box integration that they need. Yet, the number of distinct code bases is indisputably sizable, making the task of providing clear migration paths between these quite arduous, as it can be witnessed by many partners, prospective users, or analysts who typically have a time of making sense thorough the maze of the available product menu.

While the idea to enable the research and development (R&D) team to gain economies of scale by leveraging the chosen technology foundation to build common application components as commodities that can be deployed within the entire product portfolio is tempting and promising in the very long run, it will only happen in a few years time in the best case scenario, if at all, and most likely only for respective Sage's offerings in North America and the UK. The mitigating factor is the fact that, before that long-term evolution takes place, data and personalization setups will be transferable all the way up from entry-level products to enterprise-class systems, making migrations somewhat smoother.

Microsoft likes to depict itself as having the mighty R&D war chest that Sage lacks, while Sage will joust that technology is not "be all, end all" and that it has instead acquired players that are dominant in many countries. Time will only tell who the winner will be in the channel battle fought by the MBS multinational VARs against the Sage/Best regional players, which rather rely on building up strong relationships with SMEs in niche areas.

Small enterprises remain comfortable doing business with a look-alike SME VAR, especially if they can sense the relevant expertise and can hold the provider to account. While larger partners might be needed, the larger the opportunity is, Sage/Best contends that its partners are of a normal size (with $10 million [USD] in revenues at most) and there is no disparity between the largest and the smallest, which MBS will likely have.

Indeed, Microsoft's challenge with its partner program is to somehow draw together two distinct classes of partners: 1) authorized MBS resellers used to relatively healthy margins and a slower hands-on sales cycle of accounting and ERP products; and 2) the more volume-oriented Microsoft Classic partners. The giant also has to deal with partners of virtually every shape and size, from mom-and-pop corner shops servicing very small businesses/small offices/home offices (SOHO) to extremely large system integrators (SI) with their Fortune 500 customers.

Vendor Recommendations

Both vendors should, as to instill more differentiation within the channel, try to interest their resellers in industry specialization and provision of vertical extensions, or should internally vertically incline their product offering and develop industry templates, wizards, and implementation methodologies to further decrease the time and expense of implementation projects. Yet, however good ideas and intentions might be espoused by the above initiatives, such as Industry Builder and Microsoft reorienting its own field sales force to sell vertically, encouraging partners to sell vertically, and allocating a sizeable chunk of marketing dollars behind vertical campaigns, some partners might always remain under profit pressure, and feel being left behind, or increasingly controlled by Microsoft. This might be true particularly with smaller VARs that do not have the scale to compete on price, and which will have to seek niche areas where specific vertical and regional knowledge might give them the edge in service provision.

Both MBS and Sage management teams will further have to determine a narrow range of key go-to-markets for each product, clarify the positioning, and segment and target the sales channels. For example, the most common 50 or so user roles outlined by MBS would appear to be fixed, whereas partners would be more interested in seeing how these can be customized. Once they are customizable it will be even more beneficial to make these portable—to enable a reseller to create roles/user experiences and recreate them for other users.

They will also have to vigorously deliver an assuring message to the current customers about the support, enhancement, and migration plans for their respective products. The task of keeping track of a growing matrix of upgrade compatibility relationships between multiple product lines and their own nuances remains immense, in addition to some still outstanding integration and Web-enablement effort for some products. With the large amalgam of products and a huge number of users using a plethora of different module gradations or releases, the likelihood of experiencing upgrade glitches may be high, even if the products may be genetically similar.

MBS needs, at a minimum, to articulate how the above changes in channel and product strategy might translate into more revenues for partners, many of which still worry that in its push to keep its growth rates and profitability at or near historic levels, the company will continue to recruit more and more partners, devaluing their expertise and fostering partner-on-partner competition. Hence, one should be aware of SAP's threat of wooing VARs into its fledgling but possibly attractive SAP Business One program, particularly given the fact that SAP's emphasis on the quality and not on a mere number of partners and given its recently unveiled first formal PartnerEdge global program.

Some disgruntled MBS or Best VARs that have been tired of internal cutthroat competition, will have meanwhile seized SAP's first-mover value proposition, and will be sorely missed by their former partners. The forthcoming few years will be marked by wars for a limited number of VARs, and only the best-structured program for resellers will win. As mentioned earlier on, to alleviate the above conundrum, Best has been extremely active in this area, with a heavy focus on helping its channel operate better businesses through best practices sharing, benchmarking programs, and training programs in sales, consulting, and business management. While MBS will likely follow suit, the picture gets inevitably muddled by the parent Microsoft's entire channel's complex go-to-market strategies that are replete with both opportunities and intra-channel competition challenges, given all walks of life are represented within several dozen thousands of Microsoft partners (i.e., small VARs, IT consultants, system integrators, high-volume license resellers, etc.).

User Recommendations

Existing and prospective users should not be overly concerned with whether their vendor will be the ultimate market leader, but rather ensure their comfort level with the vendor's future directions and its ways to drive product usability, innovation, and acceptance, whereby productivity at both personal and organizational levels will be enhanced when technology is built and presented in an engaging, context-sensitive manner. Also, it is rarely a question of one product being "better" than another—the real challenge for all prospective users is to find the best fit with their business requirements.

While current MBS and Sage users should be encouraged by their vendors' ensured viability and plausible product roadmaps, current and prospective users should nevertheless monitor the consistency between their long announced strategy of not phasing-out any products, and the vendors' actions in continuing to strategically support all of their current products. Interested companies and resellers should consider the added functionality and cross-selling opportunities from the acquisitions or recent product extensions deliveries for an addition to their requirements list. They should be asking the vendor whether, how, and when the above customer relationship management (CRM), warehouse management systems (WMS), electronic data interchange (EDI) and collaborative business-to-business (B2B) capabilities could be added to their investment. They should also inquire about any possible impact (or benefits) of migrating towards a more advanced offering.

However, enterprises that have integration needs outside of the Microsoft environment, with multiple-platform and strong scalability requirements, and that are wary of "perpetual upgrade cycles" might want to look at more open and sophisticated offerings. To that end, with its global coverage, multi-national product's capabilities, compact cross-module integration, and technological consistency, as well as with its cross-platform support, Sage Software's ACCPAC might be a viable option.

Potential clients should conduct preliminary research on the industry expertise and reference accounts of regional offices or affiliate service providers of major products. The Industry Builder initiative should be assuring, since not only is the integration of the product handled from the beginning, but MBS also takes the responsibility for the support should the ISV/VAR partner go out of business. Existing users of the products that possibly face stabilization or discontinuation may benefit from querying the company's future product migration path, service and support, or scalability strategy. Existing customers with products based on a proprietary technology, custom systems, or products from other vendors should review the affiliate's development capabilities in order to gain data integration between their various systems.